- India’s Supreme Court has appointed an independent panel to investigate whether there have been any regulatory failures surrounding allegations against the Adani Group, following a bombshell report by a US short seller.
- The country’s highest court ordered the six-member panel to investigate “the regulatory failure to address the alleged violation of securities market laws in relation to the Adani Group,” the court ruling said Thursday.
- Billionaire founder Gautam Adani, whose family runs the Ports-to-Energy conglomerate, said he welcomes the Supreme Court order.
Adani Group signage at the Adani Defense and Aerospace booth during Aero India 2023 at Air Force Station Yelahanka in Bengaluru, India on Monday, February 13, 2023.
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India’s Supreme Court has appointed an independent panel to investigate whether there have been any regulatory failures surrounding allegations against the Adani Group, following a bombshell report by a US short seller.
The country’s highest court ordered a six-member panel to investigate “regulatory failures in addressing the alleged violation of securities market laws in relation to the Adani Group,” according to a court order Thursday.
The committee will also provide an “overall assessment of the situation, including relevant causal factors that have led to recent securities market volatility,” the court order added.
In addition, the panel will propose measures to strengthen the regulatory framework and “ensure compliance with the existing framework to protect investors”.
The lawsuit in India’s Supreme Court comes just over a month after Hindenburg Research published a lengthy report on Jan. 24 accusing the Adani Group of stock manipulation and fraud. In a more than 400-page rebuttal, the group denied any wrongdoing.
The debacle led to a massive sell-off in the group’s shares and wiped out the roughly $140 billion market value of the conglomerate’s seven largest publicly traded companies.
The panel is chaired by Justice Sapre, a retired Supreme Court Justice. The other members of the committee are OP Bhatt, KV Kamath, Nandan Nilekani and Somsekhar Sundaresan and retired judge JP Devdhar.
The Supreme Court has also ordered the country’s market regulator, the Securities and Exchange Board of India, to investigate “whether stock prices have been manipulated in violation of applicable law,” the court order said.
“SEBI will expeditiously complete the investigation within two months and submit a status report,” it added.
India’s top court said its directive was prompted by the “loss of investor wealth in the securities market in recent weeks due to a sharp drop in Adani group of companies’ share price” and the need to protect Indian investors from market volatility.
Those petitions included requests for scrutiny of issues related to “public funds” which are “at risk because public institutions such as the State Bank of India and Life Insurance Corporation of India are exposed to the Adani Group,” the court order said.
Both institutions recently told CNBC that their involvement in the Adani group is manageable.
In a recent blog, Aswath Damodaran, finance professor at New York University’s Stern School of Business, argued that the Adani Group had exploited the “weakest links” in India’s institutions to its advantage. He also said the Adani affair presents an opportunity for Indian institutions to learn lessons and try to resolve the issues.
“As for the institutions involved, which include banks, regulators, etc [Life Insurance Corporation]I have learned not to attribute to indolence and indifference to venality or corruption,” the economist said on his blog.
“A more nuanced version of the Adani story is that the family group has taken advantage of the seams and weakest links in India history,” he said, adding, “There are lessons for the nation as a whole as it stands in towards what he hopes will be his decade of growth.”
Billionaire founder Gautam Adani, whose family runs the Ports-to-Energy conglomerate, said he welcomes the Supreme Court order.
“The Adani Group welcomes the Hon’ble Supreme Court’s order,” Adani wrote on Twitter on Thursday. “It will bring finality in a timely manner. Truth will prevail.”
The mogul’s quick ouster has put his close ties with India’s Prime Minister Narendra Modi under renewed scrutiny.
Last month, billionaire investor George Soros claimed that the Adani turmoil would severely weaken Modi’s grip on power and lead to a “democratic revival” in the country.
In particular, Soros’ criticism focused on the cozy relationship between Modi and Adani. Both men are from the western Indian state of Gujarat. Adani was an early supporter of Modi’s political aspirations and championed the Indian leader’s growth vision for the country.
“Modi and business tycoon Adani are close allies; their destinies are intertwined. Adani Enterprises tried to raise capital on the stock market but failed,” Soros said.
“Adani is accused of stock manipulation and his stock collapsed like a house of cards. Modi is silent on the issue, but he will have to answer questions from foreign investors and in Parliament,” the investor added.